Friday, March 09, 2012

So the next time you hear a politician say he or she will bring down oil prices, understand it's complete BS. If Americans want lower prices, cut back. Sell those SUVs! Ride a bike when you can. If every one of us bought ten percent less gasoline, prices would fall. Fast. That's what the candidates should be saying. We need a smart leader that's honest, smart, courageous, and willing to explain dubious associations. That's what we need.

Answer: Bill O'Reilly.

Wow... FOXNews is actually right on this one:

But where are these comments today? The pundits at FOXNews now want to sell the story that Obama isn't doing good things for gas prices. Andrew Sullivan makes some points about the some of the points brought up by commentators on this subject (including Barack Obama). The block quote from Jared Bernstein is a good one:

The United States holds only a couple of percent of known global oil reserves, and we produce less than 10% of total crude. These are binding constraints that no president can change. I’m not suggesting that our domestic production has no effect on prices. But oil is a global commodity and most of it is under the land of other countries. Our contribution to supply will always be a drop in the bucket and will thus generally be a matter of cents on the gallon, not dollars.

UPDATE (3/22/2012): In a discussion on Facebook, a friend of mine posted the following, which cited a comment by GOP presidential candidate, Newt Gingrich:

Newt was saying that he could get gas down, today on NPR. "We have the potential of producing more oil than any other country", or something along those lines.

To this, I replied:

Well, we are producing more oil now than any time during the past 10 years. We are also using less oil now than during the last gasoline price spike (in 2008).

Newt is implying that the government needs to open up more federal lands to drilling. However, the amount of additional oil that the US could produce - in comparison to increased demand and available reserves in OPEC countries - is rather small, and - due to international trade agreements - we have to sell that additional oil on the world market (and not be able to have a special "American price" for sales only in the US).

HOWEVER... other countries are using more oil and the oil we are pulling requires more refining. Oil speculation markets have also developed since 2008.

And that's just for oil. The price of gasoline is affected by additional factors, including refining costs and transportation costs. The latter is - of course - a bit of a positive feedback system: the more gasoline costs, the more it costs to transport it, thus driving up the cost of gasoline. The costs of refining, though, are a little bit more complicated. Refining requires refineries (duh), and these operate on industrial economies (there was a maximum of 150 in the US in 2008). Our diminished fuel consumption since 2008 has meant that 9 of the nation's oil refineries have shut down/made idle since 2008. If the GOP want to diminish gas prices, they need to pay for oil refineries to start back up again... but that's not really the free market, right?

There is a very fast way to bring down gas prices: have the government pay a subsidy on the price of gasoline (this could be instead of or in addition to the monies allocated to oil and gas companies themselves, which has little evidence of lowering the price of fuel in any appreciable manner). Of course, that openly smacks of socialism (especially since it's effectively what Hugo Chavez's government - the GOP's modern-day socialist boogey-man - does), so that straight-forward and guaranteed lowering-of-gas-price measure is a no-go.

The other way is to remove speculation from all fuels. Of course, natural gas companies would love this idea, since natural gas speculation is one of the reasons why its price has been driven DOWN over the past year. Oil companies would hate the idea, since its prices have been driven up. (Of course OPEC can change how much oil they are producing to have some influence on this sweet money-train that they're living off of right now -- at least those OPEC countries that are stable.) However, since there are fewer oil-producing states than natural gas producing (and potentially producing) states, the senate is unlikely to pass a ban on all fuel speculation. Plus, for the GOP, that's against the free market, so it's a no-go.

Yet another way is to stop trying to declare war on Iran, to get out of Afghanistan, stop pissing off OPEC countries (which is different from "being nice to OPEC countries"), and help with stabilization efforts in Libya and Egypt. (We should help with the former because they produce a serious amount of oil and we should help with the latter because of the position of primacy that Egypt holds in the region, the fact that they have historically been our strongest ally in the region, because they control major shipping routes into Europe - which houses many, many of our strong allies - and because a stabilized, democratic Egypt is likely to move toward government reforms in the greater Middle East, likely to our long-term benefit.) Of course, this goes against the "bomb Iran" rhetoric that hasn't cooled since 2008 (which is part of the fueling - pardon the pun - of the oil price increases caused by speculation; a war with Iran - or even a destabilization in the Persian Gulf (combined with a lack of stability through the Suez) - will definitely raise the price of oil, and the speculators are betting on it). Of course, many conservative Americans apparently don't understand the difference between "not pissing off countries for no really good - or advantageous - reason" and "appeasement of dictators", so cooling one party's jets about "bomb Iran" is not a likely go-ahead strategy during a campaign year.

So what are the options that a divided, highly partisan government can pass - in an election year, no less - to lower the price of gasoline at the pump? We can't drill more oil and hope to see a diminution (heck, even if we open all the oil fields today and require drilling ASAP, the turn-around time is too long to see much of an impact before election time). We can't have an exclusive American market for oil. We can't force oil refineries to re-start. We aren't likely to pass a subsidy for gasoline. We aren't likely to stop or highly regulate the fuel speculation market. We aren't likely to help increase political stability in the one region of the world producing a significant amount of oil.

So... we are left with individual options that won't work for everyone (drive less, buy a more fuel efficient car, bike and walk more) and presidential candidates who are lying through their teeth. Hey, it's just like O'Reilly said back in 2008! Who'da thunk it?